There has been a perceptible slowing of disinvestment of public sector units in recent years. At such a time, the government seems to be planning to boost investment in a few PSUs that have remained unsold. A recent report quoting government documents says that the Union government has a blueprint to commit nearly Rs 13,000 crore to revive two state-owned units it had earlier failed to sell. Divestment plans have also been put on hold for nine state-run units including Madras Fertilizers, MMTC and Hudco. In a sharp departure from the Nehruvian legacy of perceiving state enterprises as the ‘commanding heights of the economy’, Finance Minister Nirmala Sitharaman in 2021 declared the government would exit or shut down non-strategic PSUs, except in a few core sectors such as power, petroleum, transport and defence.
Divestment targets have often been missed; in the last four years, they have been successively scaled back. So far in 2024-25, PSU stake sales have brought in Rs 9,000 crore, compared to the budgetary target of Rs 50,000 crore. Look at it another way: the government has mostly preferred to sell off minority stakes, while holding on to ownership in other enterprises. Of the Rs 4.20 lakh crore raised from disinvestment in the 10 years till the end of 2023, Rs 3.15 lakh crore was accounted for by the sale of minority stakes.
There is no doubt public enterprises serve an important economic and social purpose. Divestment cannot be an ideological formula. A case-by-case appraisal is the best way forward. There is no option but to divest or close companies that have become a drain on the exchequer. For instance, there was no way the government could turn around Air India, which was Rs 61,000 crore in the red at the time of the sell-off. In an interview in 2016, Prime Minister Narendra Modi had said: “In any developing country in the world, both the public sector and the private sector have a very important role to play. You can’t suddenly get rid of the public sector, nor should you.” A great number of our PSUs have immense asset value and most turn in profits. Financial pundits should cease to look at PSU divestment as ‘budgetary income’, and instead see how the more promising among them can be nurtured.